The False Link Between Canada Proposed Copyright Reform and Video Game Industry Jobs

Debate resumed on Monday on the copyright bill with the opposition parties citing correspondence from Canadian after Canadian concerned with the digital lock rules found in Bill C-11. Thousands of Canadians have called on the government to adopt compromise legislation that provides legal protection for digital locks but ensures that the copyright balance is retained by linking circumvention to copyright infringement. As I have chronicled in more than 50 daily digital lock postings, this view is shared by business groups, consumer organizations, cultural groups (including the leading performers and publisher associations), education and library representatives, as well as Canada's leading consumer organization. There is no serious debate about where the overwhelming majority of Canadians that have spoken out on the bill stand.

The task of defending the bill has lately fallen to Paul Calandra, the parliamentary secretary for Canadian heritage. As I posted last month, Calandra has focused on the claim that there is no jurisdiction "where digital locks have been used and the actual availability of content has been reduced." The argument is a complete red herring as no one has argued C-11 will reduce the availability of content but rather that it will eliminate many of the rights consumers obtain when they purchase that content.

Calandra has now also turned to the video game industry as a major source of support. Given the fact that writers, performers, publishers, musicians, documentary film makers, and artists have all called for greater balance on digital locks, the government has been left with fewer and fewer creative industries that support its position. On Monday, Calandra repeatedly referenced the video game industry and the prospect of lost jobs as a reason to support restrictive digital lock rules. For example:

I wonder if the member and her party opposite are talking about putting an end to the video gaming industry in this country with weak TPM measures.

Later, Calandara asked an MP:

Could he explain to the House how, in the absence of effective technical protection measures, that industry could continue to flourish in the province of Quebec?

Calandra regularly referenced the 14,000 jobs in the industry and suggested that they would be put at risk with "weak" TPM measures. Given the focus, it is important to examine the evidence that supports claims that jobs are at risk.

The Entertainment Software Association of Canada has been one of the most outspoken proponents of restrictive digital lock rules that create a two-tier legal system with greater rights for content with locks (this is the same ESAC that appeared before the Supreme Court of Canada last week to argue against two-tier copyright in the context of paying for music rights). When defending the provisions in 2010, the head of the ESAC said that digital locks are needed to prevent "cheating" at games that "gives other players unfair advantages." While it may be true that locks can be used for those purposes, it cannot possibly be the case that the government needs to enact legislation designed to stop people from gaining unfair advantages in video game play.

Assuming the ESAC wants the rules for more than just preventing cheating at games, its own evidence demonstrates why so-called "weak" TPMs (more correctly described as balanced, WIPO compliant TPMs) do not put the industry at risk. In 2007, it released a report called Entertainment Software: The Industry in Canada, which estimated that there were approximately 9,000 video game jobs in Canada. Four years later, the industry has grown to 16,000 jobs, yet Canada has had no digital lock legislation during that period. In other words, without any changes to Canadian copyright law, the industry has emerged as a major success story. Yet Calandra implausibly argues that adding legal protection for digital locks that comply with international treaties and that are consistent with countries like New Zealand (whose video game industry grew by 46 per cent last year with those "weak" TPMs) will somehow put the Canadian industry out of business.

Not only is the claim unsupported by years of experience, but when the industry was recently asked about perceived risks, copyright concerns fell well down on the list. Earlier this year, the ESAC commissioned a study by SECOR Consulting that surveyed the industry and asked for the top three risks faced by the Canadian video game industry over the next two to five years. Their responses, in order of priority:

The reference to copyright as a concern was so low - barely above concerns about an economic recession -- that SECOR did not discuss it further. Instead, it focused on the real risks to the video game industry, namely competitive issues, the need for talent (many in the industry recognize that focusing on education may be more important than copyright), and government support.

The latter issue is particularly noteworthy since the video game industry is heavily subsidized by tax credits, so that Canadians already effectively spend hundreds of millions of dollars to support these 14,000 jobs. When Calandra asks about the future of the video game industry in Quebec, MPs might note that taxpayers in the province have spent nearly half a billion dollars in subsidies, covering up to 37.5 per cent of labour costs. This is estimated as a taxpayer contribution of $11,428 per employee. Quebec is not alone -- the B.C. Interactive Digital Media Tax Credit covers 17.5 per cent of qualified labour expenditures, to a maximum of 60 per cent of production costs and Ontario has provided hundreds of millions in breaks to the industry as well. The irony of directing hundreds of millions of dollars that could be allocated toward education or health care toward an industry that then becomes one of the largest lobbyists opposing education and consumer interests on the copyright file should not be lost on anyone.

The video game industry has been a Canadian success story and copyright is certainly an issue for some companies within it (though not all - others, such as Ancaster, Ontario-based Battlegoat Studios, oppose the ESAC position). But the government's claim that adding balanced digital lock rules to Canadian copyright law would destroy the industry is plainly false and completely unsupported by recent experience and studies commissioned by the ESAC. Based on the industry's own data, opinion surveys of Canadian video game makers, industry growth in other countries with balanced digital lock rules, and the massive taxpayer investment in the industry, there is little reason to believe that amending the Bill C-11 digital lock approach would harm the Canadian video game industry.